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The COVID pandemic and the lockdown-induced recession did a number on American businesses and families. More than two years since the crisis began, the economy still seems to be on its last leg — even amid President Joe Biden’s lofty plan to “Build Back Better.” In a four-part series, The Daily Wire chronicles the “Bidenomics” regime and how it is eviscerating the American people.
From sea to shining sea, pay a visit to any grocery store or gas station and the story will be the same: Inflation is gut-punching American families who are trying to make ends meet.
Inflation — the rate at which price levels rise — was relatively stable for the past four decades. Especially in the 2010s, inflation remained at or below the Federal Reserve’s targeted 2% annual increase.
But that all began to change when President Joe Biden assumed office.
In less than two years, inflation faced by consumers has soared from 1.4% to 8.6% — the highest levels seen since the beginning of the Reagan administration. As of May 2022, the price of gasoline was up nearly 49%; the price of meat, poultry and fish was up 14.2%; and the price of used cars was up 16%.
Meanwhile, costs faced by businesses are skyrocketing at double-digit rates, driving many executives to sound the alarm over a coming recession. Likewise, consumer confidence — one of the most important metrics in the United States’ consumption-driven economy — has plummeted over the course of the Biden era.
Polls show that 95% of Americans believe inflation is “very serious” or “somewhat serious,” that 94% are “upset” or “concerned” about the impact of rising prices and that 70% disapprove of Biden’s management of the inflation crisis.
But is Biden really responsible for high inflation? To a large extent, yes — and more importantly, he has neither owned up to his mistake nor made efforts to meaningfully combat higher prices.
At the outset of his administration, President Biden signed the American Rescue Plan — a $1.9 trillion stimulus package that included $1,400 relief payments for those who met the qualifications, $350 billion for state and local governments and an extension of enhanced federal unemployment insurance. Next to President Donald Trump’s $2.2 trillion CARES Act, the American Rescue Plan was one of the largest federal spending measures in American history.
The timing of the American Rescue Plan contributed to its inflationary impact. Because the CARES Act was enacted at the worst part of the recession, it had a significant role in stemming the decline in economic output. The American Rescue Plan came as the United States economy had already been rebounding for several months — meaning that the additional spending was largely unnecessary and, in many respects, threw a wrench into the recovery.
David Bahnsen, founder of Manhattan-based wealth management firm The Bahnsen Group, told The Daily Wire that “supply-side” considerations have played the largest role in worsening inflation by providing “a massive incentive for workers to not work.” The American Rescue Plan, according to Bahnsen, has exacerbated the more significant problem of global supply chains struggling to keep up with surging demand following the recession.
“This was the last thing the supply chain needed, and it was the last thing the food and beverage industry needed,” Bahnsen said. “That element alone — federal subsidy of unemployment regardless of means testing all the way through the fall — was a fiscal disaster.”
Indeed, economists Harry Holzer, Glenn Hubbard and Michael Strain said in a recent paper that states which prematurely nixed the enhanced unemployment benefits saw “the flow of unemployed workers into employment increase by around two-thirds.”
Bahnsen observed that the loose monetary policy pursued by the Fed since the recession has primarily impacted inflation in sectors such as housing. “Low interest rates have boosted asset inflation, which is different from the cost of goods and services,” he remarked. “I believe the Fed needs to normalize interest rates to stop the exacerbation of malinvestment and capital misallocation, but I question what higher interest rates will mean for inflation.”
The Fed hiked interest rates by 0.75% in June — marking the largest increment since 1994. The central bank had already increased rates by 0.5% in May — the largest such increase since 2000 — after a 0.25% rate hike from near-zero levels in March. To signal that the administration is serious about combating inflation, President Biden and Treasury Secretary Janet Yellen met with Fed Chair Jerome Powell to show support for the higher interest rate regime.
Russ Vought, who directed the U.S. Office of Management and Budget under the Trump administration, diagnosed the problem as the White House being “largely controlled by ideologues.”
“With inflation over 8% today, if given a multitrillion-dollar ‘Build Back Better’ bill, Biden would sign it,” Vought explained. “I can’t tell you whether the President is largely personally disconnected from the American people or not, for whatever reason, but we’re not seeing that pivot.”
Though Vought said that Yellen is perhaps the one official who has “behind the scenes” concerns about inflation, he noted that she has “not been vocal in restraining the spending.”
Yellen said last year that she was willing to pursue an aggressive spending agenda because the United States has “been fighting inflation that’s too low and interest rates that are too low now for a decade” — promising any potential inflation “spurt” from Biden’s policies would fade away by 2022. In the subsequent months, progressive economists and Democratic officials such as Larry Summers and Jason Furman began questioning the Biden administration’s agenda.
One year later, Yellen finally declared: “I was wrong.”
“Yellen is not a policymaker in this administration, but a spokesperson and figurehead for Ron Klain, Brian Deese and Jared Bernstein,” Bahnsen said. “Secretary Yellen was not wrong about the low rates and low inflation from 2008 to 2020, but her surprise at the demand surge and supply inadequacy of 2021 reflects her Keynesian obsession that fails to understand the supply side of the economy.”
President Biden has thus far failed to acknowledge that his policies have contributed to soaring inflation. The commander-in-chief has instead blamed corporate price gouging and “Putin’s price hike” for the rising prices. Biden even falsely claimed that inflation is “worse everywhere but here” — though developed nations such as Germany, the United Kingdom, Canada, South Korea and Japan are experiencing lower inflation than the United States.
“You have to be straight up to the American people,” Vought noted. “It’s a problem. If you don’t want to admit that your policies have caused it, at least do not try to malign the intelligence of the American people by coming up with a little gimmicky response. Just be straight up and take your medicine.”